The container spot market improved notably over the past week as liner operators reduced shipping capacity on the route that ships merchandise from Asia to Europe, an analyst said.
The Shanghai Container Freight Index rose 10.2% over the past seven days to 1,012 points to mark the biggest one-week leap since November 2020, Clarksons Securities wrote in a note on Friday.
Analyst Frode Morkedal said rates for the Asia-to-Europe trade were the main driver behind the index as they bounded 32% over the same period.
“This uptick follows liner companies’ recent moves to curtail capacity, especially on the Asia-Europe trade route, where rates had fallen to below $600 per teu or $1,200 per feu,” he said.
Meanwhile, major liner companies have announced plans to implement general rate increases on 1 November that will boost rates for routes from Asia to northern Europe to $1,800 per feu, Morkedal said.
“The market seems to be reacting positively to these adjustments,” he wrote.
“However, challenges remain for liner companies. Net fleet growth is projected to accelerate from 7% year-on-year in October to 10% by May 2024, intensifying the uphill battle for these companies.”
Liner operators are pushing for rates as high as $2,000 per feu on the Asia-to-US West Coast route and $1,500 per feu on the Asia-to-Europe route, but the increases will not necessarily make for a strong market, Jefferies analyst Omar Nokta said.
“Overall, the container market backdrop remains soft, with the latest freight rates still at loss-making levels for liner operators.”
And liner operators will need to carry out hefty general rate increases to reach that level, according to the Freightos Baltic Index.
The average spot rate for the China-to-US West Coast route came in at $1,563 per feu on Friday after gaining 3% over the course of the week, according to the index.
It measures the average spot rate for the China-to-northern Europe route remained essentially at $1,042 per feu on Friday, barely changed from a week earlier.
